Write a business plan: step-by-step

As part of your plan you will need to provide a set of financial projections which translate what you have said about your business into numbers.

You will need to look carefully at:

• how much capital you need if you are seeking external funding
• the security you can offer lenders
• how you plan to repay any borrowings
• sources of revenue and income

You may also want to include your personal finances as part of the plan at this stage.

For further information on how to fund your business, see business financing options - an overview.

Financial planning

Your forecasts should run for the next three to five years and their level of sophistication should reflect the sophistication of your business. However, the first 12 months' forecasts should have the most detail associated with them.

Include the assumptions behind your projection with your figures, both in terms of costs and revenues so investors can clearly see the thinking behind the numbers.

For further information see calculate how much money you need to start your business and managing business finance during the start-up phase.

What your forecasts should include

• Sales forecast - the amount of money you expect to raise from sales - see forecast and plan your sales.
• Cashflow statements - your cash balance and monthly cashflow patterns for at least the first 12 to 18 months - see cashflow management.
• Profit and loss forecast - a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads.

For financial forecast examples, download a spreadsheet containing cashflow forecast, profit and loss forecast and sales forecast templates.

Risk analysis

Alongside your financial forecasts it is good practice to show that you have reviewed the risks your business could be faced with, and that you have looked at contingencies and insurance to cover these. Risks can include:

• competitor action
• commercial issues - sales, prices, deliveries
• operations - IT, technology or production failure
• staff - skills, availability and costs
• fire or flood

See risk management.